If EPS Growth Is Important To You, Signify (AMS:LIGHT) Presents An Opportunity

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Signify (AMS:LIGHT). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out the opportunities and risks within the XX Electrical industry.

How Fast Is Signify Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Signify has managed to grow EPS by 29% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Signify achieved similar EBIT margins to last year, revenue grew by a solid 12% to €7.5b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Signify.

Are Signify Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

First things first, there weren't any reports of insiders selling shares in Signify in the last 12 months. But the important part is that CFO & Member of Board of Management Javier Van Engelen spent €330k buying stock, at an average price of €33.03. Big buys like that may signal an opportunity; actions speak louder than words.

Is Signify Worth Keeping An Eye On?

For growth investors, Signify's raw rate of earnings growth is a beacon in the night. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. So on this analysis, Signify is probably worth spending some time on. We should say that we've discovered 3 warning signs for Signify (2 are a bit unpleasant!) that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Signify, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.